Introduction

One of the purposes of a commercial contract is to allocate risk and liability through, for example, the provision of indemnities. In this context, one party may choose or be required to cover the liability allocated to it through a covenant to purchase or maintain certain insurance policies. Insurance also protects the party to whom the liability is owed so that if the party accepting the liability is unable to discharge its liability, the insurance should step in and pay subject to the terms and conditions of the relevant policies.

A crucial element of any insurance policy is the scope of risks which it covers. There will always be restrictions on the scope of coverage, including limit(s) to the sum insured, a defined period of insurance and various conditions which regulate the cover. There will also be procedures to follow in the event of a claim. See Practice Note: liability insurance—notification of claims and circumstances and defence of claims

These guidance notes are designed to provide an overview of: